Idea-Vodafone set to use 60% of spectrum for 4G, Kapania seen leading

Idea Cellular and Vodafone India will gear their network heavily towards 4G after merger and will also shut down over 60,000 cell sites as part of network optimization, going by the presentation being made by Idea in front of investors.

The companies had earlier announced that they would surrender around 6,300 cell sites that are located on their own towers. These towers were sold to American Tower Corporation late last year.

The two companies are estimated to have around 5.5 lakh base stations between them. These are located primarily on third-party premises and towers.

Surrendering of 60,000 base stations will result in massive savings for the combined entity, though it could be a dampener for tower companies.

The surrender of telecom ‘tenancies’ is possible as a single base station can easily handle the load of two if its spectrum is doubled. In other words, a base station that is handling a traffic of 200 Mbps using a 10 MHz block of spectrum will have no trouble handling 400 Mbps using double that amount of spectrum, as long as the back-end fiber connectivity is robust enough.

Idea said it will take these surplus base stations and equipment and move them to more remote locations where to expand the combined company’s 3G and 4G networks.

“Overlapping 3G and 4G sites (is) to be used to expand broadband coverage,” it said.

It will, however, find it tougher to dispose of older 2G equipment as companies have stopped deploying 2G-only solutions in India.

Idea too said the combined entity will focus on deploying ‘Single RAN’ or single radio access network equipment.

Broadly speaking, single RAN equipment can transmit 2G, 3G and 4G signals and across different spectrum bands. However, companies may still need to use more than one antenna as the shape and size of the antenna is dependent on the frequency band.

Within the same band — for example 1800 MHz for GSM and 4G, and 2100 MHz for 3G and 4G — it will be possible to have both signals simultaneously transmitting from a single set of equipment. This too will save money for the combined entity.

4G, 4G & 4G

Idea said the focus will be on ‘refarming’ or reallocating more and more spectrum towards 4G.

In an estimation of the situation that may exist after the merger, the company projected that about 59% of the combined entity’s total spectrum will be deployed towards 4G, while 2G will account for about 23% and 3G for about 18%.

Within the two adjacent bands of 1800 and 2100 MHz, the combined entity will have a total of 1029 MHz out of which 689 MHz will be diverted towards 4G and 340 MHz will be kept back for 3G.

The above projections include the diversion, or refarming, of spectrum currently being used for delivering 2G services in 1800 MHz for 4G.

Idea said it was considering “additional carrier deployment” in the 1800 Mhz band in 12 markets for 4G. It is possible to deploy additional blocks for 4G only if 2G users are moved out of some of the spectrum to ‘make space’ for 4G. Once the merger goes through, it will be possible to achieve this more easily because of the elbow room provided by the combined, large amount of spectrum.

In addition to the above, the combined entity will also have an additional 380 MHz of 4G-only spectrum in the 2300 and 2500 MHz bands that is currently untouched.

2G TO 4G

Besides the above, the joint entity could also add to the projected 4G spectrum tally by diverting chunks of the high-propagation 900 MHz waves towards LTE.

Within the 2G block of 421 MHz, 142 MHz — or 34% — is located in the highly precious 900 MHz band.

Out of this, the combined entity can divert one block of 5 MHz for 4G spectrum in 10 circles, and two blocks in seven circles. This would add up to 240 MHz of additional spectrum diverted from 2G to 4G in addition to the above.

This is also likely to be achieved using a ‘Single RAN’ solution under which the company can deploy a single piece of equipment that will radiate both 2G and 4G signals on 900 MHz.

Idea said it was looking towards solutions that allow for dynamic spectrum allocation or “flexible allocation of spectrum across 2G/3G/4G based on traffic demand.

Under this model, the amount of spectrum allocated to 2G and 4G keeps fluctuating according to traffic conditions. When 4G traffic is heavy, more of the spectrum is used for the 4G service and when 2G traffic is heavy, more of its diverted automatically for 2G.

Diversion of 900 MHz spectrum for 4G would allow Idea-Vodafone to mount a serious challenge to Reliance Jio’s predominance in 4G coverage in India.

Jio is by far the top player in 4G as far as coverage is concerned, due mainly to the fact that it has RCom’s 850 Mhz spectrum. Being of ‘low frequency’, both 850 MHz and 900 MHz spectrum have excellent propagation characteristics and help telcos cover large areas with fewer towers.

Refarming of 900 MHz spectrum for 4G will also help Vodafone-Idea gain an narrow edge over Bharti Airtel in terms of 4G coverage.

Against 17 circles for Vodafone-Idea, Bharti has 900 MHz spectrum in 15 circles.

The only risk for this strategy is if the proposed alteration of a key rule — which prohibits any single company from holding over 50% of the total spectrum in any band — fails to go through. At present, the government is considering relaxing the rule, but the move has been opposed by some players.

If the rule is not relaxed, the combined entity could breach the 50% limit in some circles.

The total spectrum in the 900 MHz band is around 19 MHz each in most circles. This implies a per-company limit of 9.5 MHz. However, between the two of them, Vodafone and Idea hold 10 to 14 MHz of spectrum in the 900 MHz band in 7 out of the 22 circles in India.

KAPANIA TO LEAD?

The presentation also said that the combined entity will choose a CEO on the principle of ‘best person for the role’, but the right to choose the chief financial officer would remain with Vodafone.

The granting of the right to determine the CFO to Vodafone is seen as a concession made by Idea in return for appointing current Idea CEO Himanshu Kapania as the head of the combined company.

In addition to the CEO, there would also be a chief operating officer, who will presumably come from the Vodafone side.

The new company will have a board with 12 members, three of whom will be nominated by the Aditya Birla Group and three by Vodafone.